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Dell Board Group Defends $24.4 Billion Deal to Take Company Private

The special committee says the plan to sell the company to Michael Dell and others was the best option, despite criticism from investors.

Dell's special committee that is overseeing the $24.4 billion sale of the world's third-largest PC maker to a group headed up by founder and CEO Michael Dell is reiterating that, despite opposition from some large investors, the deal is the best one for the company and its shareholders.

The group, made up of members of Dell's board of directors and advised by investment bank Evercore Partners, said in a March 6 statement that it had aggressively negotiated for the $13.65-per-share price, which the committee said was a 37 percent premium over the share price at the time in January that rumors of a deal to take Dell private began to surface.

Dell eventually announced the buyout Feb. 5.

At the same time, the group noted that it also was able to negotiate for a low fee in case the deal collapsed and a "robust go-shop process" that allows for the committee to accept competing bids through March 22, and to continue negotiating beyond that should a strong competing bid come up. Evercore "is actively soliciting potential alternative proposals," the group said in its statement.

Further reading

The special committee spent five months hashing out all options for the company—including continuing with the status quo, slightly modifying the plans that were in place, or selling parts or all of the company.

"As a result of that process, the Special Committee unanimously determined that the sale of the Company would be the best alternative for stockholders," the group said.

Like other tech vendors with tight ties to the PC market—particularly companies like Hewlett-Packard, Intel and Advanced Micro Devices—Dell has been hit hard by the trend among consumers away from buying PCs and laptops and toward mobile computing devices like smartphones and tablets. PC sales worldwide continue to contract, and Dell executives for several years have worked to shift the company to more of an enterprise IT solutions provider.

It's been a difficult and expensive transformation, including the acquisition of more than a dozen companies to enhance Dell's capabilities in such areas as storage, networking, software and the cloud. The idea behind taking the company private is that it would enable Michael Dell and other executives to accelerate the transformation without being hindered in its actions by the pressures of Wall Street or having to hit quarterly financial targets.

Included in the group that would buy Dell would be investment firm Silver Lake Partners and Microsoft.

However, Dell is getting pushback from large investors who say the $13.65-per-share price is too low for the company. Southeastern Asset Management and T. Rowe Price, which together hold a reported 13 percent of Dell shares, both oppose the deal, with Southeastern officials saying they put the target price for the company at more than $20 a share.

To be completed, the deal needs the approval of the majority of shareholders.

Southeastern officials in a March 5 letter again accused the board of directors of undervaluing Dell, and criticized the board for dismissing better alternatives in favor of an "opportunistic" deal that benefits management over shareholders.